Finance Committee on Nov. 9th, 2017

[Dr. Cory Mulvihill]

It's important that government be seen as a supportive partner to the tech ecosystem. Our perspective is that the entrepreneurs who found and grow companies should be in the driver's seat, but organizations such as ours and the government can be enablers to help grow the innovation ecosystem and to help grow those companies.

At MaRS, we provide advisory services; in some cases, we provide space. The strategy is really about removing as many barriers as possible to allow those companies to grow and benefit the economy. I would say the same with regard to supports from the government. The venture capital catalyst initiative is one of those interventions whereby government, in partnership with the private sector, can address a gap that we've found to ensure that companies are able to access capital when they need it.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

I'll move on to CFIB.

You didn't get to this, Corinne, on the slides that you provided—and thank you for the slides—the Canadian Free Trade Agreement. With regard to reducing barriers, when we say “bilateral” or “multilateral”, we often think of outside of Canada and our international partners, but there also exist barriers within our great and beautiful country.

I want to get your feeling. How important is the CFTA for your members in being able to export and import within Canada, open new businesses, and expand? If you could talk about the CFTA on that angle, on how important it is and how we can leverage it, that would be wonderful.

[Corinne Pohlmann]

I would say it's absolutely critical, because the Canadian Free Trade Agreement is.... If a small business has trouble selling goods or services across provincial boundaries, the likelihood they're going to try to go international is even more remote. Getting rid of some of those barriers that are happening between provinces would go a long way in making it a lot easier to do business.

Of course, the other factor in all of this is that with the Canadian-European trade agreement, there would have been this weird scenario in which European companies would have had better access to certain procurement contracts than Canadian companies would, so we had to do something to disband some of these barriers. Absolutely, it's critical, because this is where small businesses trade, and if we can get them to feel more comfortable trading across the country, we think we can then encourage them to start thinking about trading into other countries, which is what we want them to do.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Of course. Thank you.

Do I have another minute, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

Yes, you do.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you for pointing out some concerns you may have on the multiplication of the small business deduction. That's the first I've heard of that language here, so I definitely want to take a look at that.

I want to add, although it's not in Bill C-63, that it was announced that we'd be lowering the small business tax rate to 9% by the end of 2018, which would provide up to about $7,500 in tax savings to your members. I think we need to applaud that.

I will move on to Ms. Agnew and the nurse practitioners.

Our health care system innovates along the way and provides innovative solutions—if I can use the word “innovation” on that angle—and flexibility. I see the contents of Bill C-63 as providing enhanced flexibility for patients because nurse practitioners will be able to fill a void and gap in certain areas geographically and also provide flexibility to the health care system.

How important is it for nurse practitioners to have this right and be given this responsibility for their patients?

[Theresa Agnew]

The omnibus bill includes numerous forms that will be changed so that the signature of a nurse practitioner can be accepted. That helps to provide expeditious care from someone who's gotten to know the client and has assessed the client. It also decreases extra visits back for a client to see another health care professional, so it's very cost-effective that way.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

You're saying that Bill C-63 and providing nurse practitioners with that additional responsibility will potentially save the health care system dollars and will improve health care outcomes for individuals, or patients, if I can use that term correctly. I think that's great.

[Theresa Agnew]

Absolutely.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you very much for commenting.

I do want to move on to Mr. McDonald.

How important is it for students to get internships and to get that experience in general? Do you want to comment on that angle, please?

[The Chair, Liberal, Wayne Easter]

You're next.

[Michael McDonald]

I think that our 22 student government members in both college and polytechnic and undergraduate and graduate associations have all seen that in the changing nature of post-secondary education, it's critical to be able to get access to on-the-job opportunities, if a student wants them.

We think that overall the promotion of more work-integrated learning opportunities that are clearly compensated, and that show students the value of their work, is critical. If we want students to be able to find those opportunities further on, showing them the value of what they are contributing, and giving them paid opportunities, really bring that forward and give them that opportunity very clearly early on. We think firms have clearly demonstrated that when those students have been able to come in and learn the firm's culture, which they've stressed is important, the students are better able to adapt into those kinds of private sector opportunities.

We think it's been critical overall. It's a really good opportunity. It's something that needs to be expanded further into all disciplines.

[The Chair, Liberal, Wayne Easter]

Mr. Kmiec is next.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

I'm going to start with the Canadian Federation of Independent Business.

You were speaking really fast at one point, so even I had difficulty keeping up, and I wasn't listening to translation. You mentioned that some members are being informed by maybe their accountants, or your association, to keep two ledgers to comply with some of these rules.

Can you explain a little bit more about why they will need to have two ledgers now in order to ensure they have an opportunity to comply with some of these rules that are being introduced?

[Corinne Pohlmann]

In budget 2016 there were some changes made to what they call the multiplication of the small business deduction. This was to prevent, I believe, mostly professionals from taking advantage of the small business deduction more than once. When the rules came out, it ended up having a far broader reach, because there was, again, a lack of clarity around what it actually meant. It ended up having an impact on businesses or family businesses that are maybe doing business with each other but may not actually have ownership of each other's businesses.

In many small or remote communities in Canada, sometimes families own multiple businesses. They each individually own those businesses, but they have to do business with each other because they don't have any other suppliers. That's seen now as potentially being caught in this rule. To avoid it, their accountants are now telling them that they should probably keep two sets of books, one for the business they are doing with their own family members and one for the business they're doing with non-family members, and at the end of the year clarify. Basically, for any earnings they get from the business they're doing with family members, they're not able to get the small business rate. For any earnings they get from the business they do with non-family members, they are able to get the small business rate.

It's adding complexity. There's a lack of clarity and information on whether this is the way they go. They are basing what they are doing on what their accountants are telling them.

We have tried to get greater clarity from the finance department on this aspect. We haven't necessarily gotten very clear feedback on whether this is the right way to go or whether this is what they have to do. We're still suggesting that they need to do more to understand the impact of these changes, because in my opinion they have gone more broadly than they originally intended.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

There are two things there. You're saying that this has a greater impact in rural communities, where there are fewer opportunities to find competitors or other suppliers, so you will do business within a family or with relatives you know. There's a certain amount of trust you have that they are going to pay on time and are going to be good clients of yours and good supporters of the business.

On this compliance measure, you said you had been talking to the finance department. The information you got back wasn't clear. Is there a lack of clarity there in clarifying the rules?

[Corinne Pohlmann]

We've asked them to provide us with feedback on the advice we can give our members who are in this situation, and we haven't received any feedback. Essentially, it's “go talk to your accountant”, so they are doing what their accountants are telling them, and their accountants are basing it on what they can see. They are trying to be as cautious as possible to make sure they are abiding properly with the rules.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

They are keeping two sets of books to hopefully comply with whatever the taxman of the day determines is fair taxation, so to speak. That must be more expensive for members.

[Corinne Pohlmann]

Absolutely. I would suggest that this is even the bigger issue we're dealing with right now. It's the complications and the administrative burden this is adding, more than the fact that they are not able to get the small business deduction on a portion of their—

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Has your association determined, on average, what that cost could be for a small business?

[Corinne Pohlmann]

We don't really know how broad it is at the moment. Again, I gave you one example of a family farm in rural Alberta. I have another example, again from a small community, where the child owns a construction company and the parent owns a lumber yard. Again, it's a small town, so most of their lumber comes from their parents. They are two different companies, but they are being caught in this as well. They have been given the same advice.

It's out there, and it's happening. I was left with the impression after budget 2016 that this was not the intent of these changes, so that's what we worry about in terms of where we are going to go forward. That's why we suggest that further analysis needs to be done on this aspect.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

How much time do I have, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

You have time for a very short question.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

When these changes were introduced in 2016, was your organization consulted before these changes were introduced?

[Corinne Pohlmann]

We were told a little bit about the planned changes that were coming, and we were told that they shouldn't affect the vast majority of our members. That's why we weren't too concerned when we first saw them in the budget, but when the actual legislation came out, we started hearing concerns from accounting members and individual members.